The European Commission today welcomes the adoption by the European Parliament and Council of new legislation on bilateral investment agreements. This is a key step in respect of foreign direct investment, which has become an exclusive EU competence under the Lisbon Treaty. Some 1,200 Bilateral Investment Agreements had been concluded by Member States with non-EU countries prior to the entry into force of the Lisbon Treaty in 2009, and the status of these agreements needed to be clarified under the new Treaty rules.

"This is a major step forward for EU investment policy and one of the most fundamental updates of trade policy after the Lisbon Treaty. It will grant legal security to existing bilateral investment treaties concluded between our Member States and non-EU countries, as the EU is moving to replace them over time by EU-wide investment deals. This will protect EU investments abroad and allow investors legal channels to defend themselves when needed - the current dispute between Repsol and Argentina is a case in point. At the same time, the Commission will review and assess such agreements to prepare the ground for EU wide investment agreements that will replace the bilateral texts over time. It's my ambition that, with time, every European investor has an equal protection of his interests abroad which, for the moment, is only sometimes assured to investors from a limited number of member states", said EU Trade Commissioner Karel De Gucht.

The Regulation will ensure a smooth transition towards the new EU investment policy in two ways:

It provides the legal certainty for European and foreign investors benefiting from investment protection offered in Member States' bilateral investment agreements concluded with other parts of the world previous to the Lisbon Treaty which entered into force in December 2009. It clarifies the legal status of those agreements under EU laws and confirms that they may be maintained in force until they are replaced by an EU investment agreement.

At the same time, the Regulation also establishes a mechanism for empowering Member States – under certain conditions – to negotiate bilateral investment agreements with countries not immediately scheduled for the EU-wide investment negotiations. This is designed to expand the scope of investment protection currently available to European investors.

All appropriate safeguards are in place to ensure that investment agreements of Member States will not create any serious obstacles to the smooth implementation of the EU investment policy.

Background

Foreign direct investment (FDI) is a main contributor to economic growth. Outward FDI offers access to markets, technologies and resources, has a positive effect on EU firms' competitiveness by reducing costs and creating economies of scale. Inward FDI enhances the EU's competitiveness by bringing in foreign capital, technologies, management expertise, and often boosts exports.

The EU is the world's leading host of foreign direct investment, attracting investments worth €225 billion from the rest of the world in 2011 alone. By 2010 outward stocks of FDI amounted to 4.2 trillion Euros (26.4% of the global FDI stock in FDI) while EU inward stocks accounted for 3 trillion Euros (19.7% of the global total).

Those investments are secured via Bilateral Investment Treaties (BITs), concluded between individual EU Member States and non-EU countries. They establish the terms and conditions for investment by nationals and companies of one country in another and set up a legally binding level of protection in order to encourage investment flows between two countries. Amongst other things BITs grant investors fair, equitable and non-discriminatory treatment, protection from unlawful expropriation and direct recourse to international arbitration. EU countries are the main users of BITs globally, with a total number of about 1,200 bilateral treaties already concluded.

Foreign direct investment became the exclusive competence of the EU under the Lisbon Treaty (Article 207 TFEU).

Before the entry into force of the Lisbon Treaty, investment was a policy field with a specific division of work between the EU and its Member States. Their roles in shaping investment policies were complementary: whilst the EU pursued the liberalisation of foreign direct investment, in particular through its trade agreements with non-EU countries, the Member States used to seek the protection of investment flows, by concluding Bilateral Investment Treaties.

The Lisbon Treaty allows the EU to bring all these elements together under the cover of a single EU common investment policy. The European Commission is currently negotiating on investment, including investment protection, as part of the Free Trade Agreement talks with Canada, India and Singapore. The Council has also recently welcomed the opening of negotiations with Tunisia, and adopted the negotiating directives for Morocco, Jordan and Egypt. Moreover, following two joint declarations from the EU-China summits this year, the Commission is also exploring negotiating opportunities with other important investment partners, such as China.

The regulation was proposed by the Commission in 2010 (IP/10/907). It will enter into force on the twentieth day following its publication in the Official Journal of the EU.